M&A Deals Boost Markets; S&P 500 Hits Record Level

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U.S. stock indexes finished mostly higher Monday on the latest round of deal news, including China's $3 billion investment in private equity powerhouse Blackstone Group, but rising oil curbed gains.

Shares of Amazon rose (AMZN) 7.9 percent after Citigroup raised its price target on the stock, lifting the Nasdaq, while technology stocks benefited from a $25 billion takeover deal for mobile phone company Alltel Corp (AT).

The Standard & Poor's 500 index rose above the record close it reached in 2000 before giving up some of those gains to end 2 points short of the record, as higher oil prices revived some concerns about the bite that rising energy costs will take out of corporate profits and consumers' budgets.

News that China's state investment agency said it plans to take a stake of $3 billion, or 10 percent, in the Blackstone Group of the United States, also contributed to investor confidence.

"The China deal highlights there is a lot of liquidity not only in the U.S. but all over, and that this buyout activity is not going to end anytime soon," said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston.

"But every day we go up, people get a little bit more nervous and look for what can derail the train. Today, the most obvious thing is what's going on with energy."

U.S. crude oil futures ended above $66 a barrel on uncertainty about supplies from Nigeria. Shares of industrial conglomerates heavily dependent on oil fell, dragging on the Dow. Shares of Alcoa Inc. (AA) fell 1.9 percent to $38.99, while Honeywell International (HON) shed 0.7 percent to $58.30.

The Dow Jones industrial average declined 13.65 points, or 0.10 percent, to end at 13,542.88, after earlier climbing to an intraday record high at 13,586.03.

The Standard & Poor's 500 Index rose 2.35 points, or 0.15 percent, to finish at 1,525.10. The Nasdaq Composite Index gained 20.34 points, or 0.80 percent, to close at 2,578.79.


Just before midday on Monday, the S&P 500 breached 1,527.46 -- the record close set on March 24, 2000, in the dot-com bubble's last throes. Later in the session, though, the S&P 500 gave up some of those gains. The index still has some way to go to break its all-time intraday high of 1,552.92, a record it also set on March 24, 2000. It rose to 1,529.87, a fresh 52-week high, during Monday's session.

The S&P 500's rally in the past few weeks has been driven mainly by energy and materials stocks, but they weren't enough to help the S&P hold on to the level required to break its record close.

Monday's rally favored small-cap issues, with the Russell 2000 rising 1.2 percent to close at 833.65, after climbing as high as 837.19. Small-cap stocks have been lagging the bigger indexes all year.

Alltel's shares rose 6.8 percent to $69.66 on the New York Stock Exchange after it agreed to be bought by TPG Capital and the buyout arm of Goldman Sachs.

The deal is the latest in a series of transactions in which public companies are being taken private, reducing the amount of outstanding shares in the market and sending stock indexes higher.

In other takeover news, diagnostics firm Hologic Inc. (HOLX) said it planned to buy Cytyc Corp. (CYTC), another women's health company, for $6.2 billion.

Shares of Cytyc surged 22.7 percent to $43.00 and ranked among the Nasdaq's top percentage gainers, while Hologic's stock was down 6.3 percent at $54.00 in Nasdaq trading.

Shares of drug maker Merck & Co Inc. rose, after a study found competitor GlaxoSmithKline (GSK) Plc's diabetes drug Avandia raises the risk of death due to heart disease. Merck's (MRK) shares rose 1 percent to $53.79 on the NYSE.

Lowe's Cos. Inc. (LOW), the No. 2 U.S. home improvement retailer, fell after it posted first-quarter earnings that missed Wall Street's estimates by a penny and lowered its profit outlook for the year. Lowe's stock fell 2.4 percent to $31.88 on the NYSE.

Trading was light on the NYSE, with about 1.51 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on the Nasdaq, about 1.97 billion shares traded, below last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 5 to 3 on the NYSE and by 2 to 1 on Nasdaq.